Greater diversification in risk exposure

The tensions in Ukraine are making us more cautious, but give us no reason to amend our risk-on positioning substantially. However, we are focusing more on contrary positions in real estate equities and commodities, as we believe that these contain attractive opportunities.

Although we recently reduced our position in European equities to neutral (due to the exposure to both emerging markets and Russia/Ukraine), we maintain our positive outlook for peripheral Eurozone equity markets.

The increased tensions in Ukraine only had a short-lived negative impact on global equity markets. For the time being, markets assume that some kind of compromise will be reached on the conflict over the Crimea. However, far-reaching political and economic sanctions by the West could further undermine investor sentiment with respect to Russia.

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## Emerging markets and China viewed as greatest risk

Over the past few weeks, investors have become increasingly concerned about the outlook for the Chinese economy. This has been reflected in investor risk appetite. We share the markets’ view that the outlook for emerging markets in general and China in particular poses the greatest risk.